PBGC Takes $2.3 Billion Pension Loss from US Airways
FOR IMMEDIATE RELEASE
February 02, 2005
WASHINGTON- The Pension Benefit Guaranty Corporation today announced it has assumed responsibility for the pensions of more than 51,000 flight attendants, machinists and other employees of US Airways, the bankrupt air carrier based in Arlington, Va. The estimated cost to the pension insurance program is $2.3 billion, in addition to the $726 million claim from the US Airways' pilots plan in 2003. The total claim of $3 billion is the second largest in the history of the pension insurance program, after Bethlehem Steel at $3.7 billion.
"The PBGC will protect the pension benefits of US Airways' workers and retirees," said Executive Director Bradley Belt. "But the pension safety net is badly frayed. The Administration has put forward a comprehensive proposal that requires companies to pay for their promises, strengthens the insurance backstop, and sheds light on plan finances. We look forward to working with Congress to enact these reforms promptly."
The Retirement Plan for Flight Attendants and Retirement Plan for Machinists ended as of Jan.10, 2005, and the Retirement Plan for Certain Employees of US Airways ended as of Jan. 17, 2005. The PBGC became trustee of all three plans on February 1, 2005. According to PBGC estimates, the plans are 40 percent funded, with $1.7 billion in assets to cover $4.2 billion in liabilities. Of the $2.5 billion shortfall, the PBGC will guarantee payment of an estimated $2.3 billion.
Based upon an extensive financial review, the PBGC determined that US Airways met the legal criteria to transfer its pension liabilities to the federal pension insurance program and advised the bankruptcy court of its findings. U.S. Bankruptcy Judge Stephen S. Mitchell ruled on Jan. 6, 2005, that the company could not emerge from Chapter 11 bankruptcy protection unless the plans were terminated.
US Airways retirees will continue to receive their monthly benefit checks without interruption, and other workers will receive their pension when eligible to retire. Under federal pension law, the maximum guaranteed pension at age 65 for participants in plans that terminate in 2005 is $45,613 per year. The maximum guaranteed amount is lower for those who retire earlier or elect survivor benefits. In addition, certain early retirement subsidies and benefit increases made within the past five years may not be fully guaranteed.
Within the next several weeks, the PBGC will send trusteeship notification letters to all participants in the US Airways pension plans. Workers and retirees with questions may consult the PBGC Web site, call toll-free at 1-800-400-7242. For TTY/TDD users, call the federal relay service toll-free at 1-800-877-8339 and ask for 800-400-7242.
US Airways retirees who draw a benefit from the PBGC may be eligible for the federal Health Coverage Tax Credit.
The PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974. It currently guarantees payment of basic pension benefits earned by 44 million American workers and retirees participating in over 31,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and by investment returns.
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PBGC No. 05-22